I expect that oil will make a bearish divergence before it tops. A market rarely tops when momentum is insanely high, which is why a divergence is necessary. Like the S&P 500’s meltup, oil has yet to make a bearish divergence.

Here’s oil on a daily bar chart.

Here’s oil on a weekly bar chart.

3 pm: The major commodities will go up together.

The upcoming rally in gold/silver (as the USD breaks down) will lift other commodities up too. For example, there is a strong correlation between gold/silver and copper right now.

After breaking down below critical support on Friday, the U.S. Dollar Index’s downtrend is accelerating. The USD’s bear market is firmly in play.

EURUSD continues to breakout.

Smart Money sentiment (from the COT Report) is heavily bullish on the USD. However, the Smart Money is wrong at bull-bear inflection points. When the Smart Money is heavily bullish in a USD bear market, they are forced to cover their positions as the USD goes down. The Smart Money isn’t always right.

The Smart Money is already starting to cover their long USD positions as the USD goes down. I expect the USD to fall over the next few months while the Smart Money continues to cover their long USD positions.

6 am: Gold and silver’s breakout continues

I said on Friday that gold and silver are on the verge of breaking out above multi-year resistances.

Gold and silver are breaking out today as the USD breaks down. There is an inverse correlation between the USD and gold/silver right now.

Here’s the correlation between UUP (USD Index etf) and GLD (gold etf). Notice how their inverse correlation is becoming stronger.

There is also a moderately inverse correlation between the U.S. dollar (UUP) and silver (SLV).

Silver is up much more than gold today (silver +1.3%, gold +0.6%). This means that the gold:silver ratio is falling, which is a bullish sign for precious metals.

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